Japan’s Dai-ichi Life commits $440m to ESG fund

The new vehicle, formed with Japanese manager Samurai Capital, will focus on real estate assets with a social impact without having a lower return target.

Japanese insurer Dai-ichi Life Insurance Company is trying to embrace ESG in its real estate investments while minimizing the cost of such initiatives in its latest dedicated ESG real estate fund.

The investor has formed a ¥50 billion ($440 million; €378 million) vehicle with Japanese real estate manager Samurai Capital to invest in real estate assets with social significance. With a core strategy, the vehicle will acquire 30 assets including daycare centers and student housing. So far, it has acquired five assets. Dai-ichi Life is the only investor in the fund and Samurai Capital is responsible for the deal sourcing and asset management of the vehicle.

Ken Aoyama, founder and chief executive officer of Samurai Capital, told PERE that by selectively investing in real estate assets with a social impact, the fund will be able to satisfy the requirements of GRESB’s Global ESG Benchmark for Real Assets without having a lower return target.

“Although ESG is a growing theme globally, most of the Japanese investors are still not ready to sacrifice return for ESG investments,” Aoyama said.

He explained assets like childcare centers and nursery homes do not require significant investment in the building infrastructure like traditional real estate assets do. “While you don’t have to put a lot of capital into things like solar panels and other technologies, children daycare centers still fit the social element of the equation by promoting care for children and the advancement of more females to work in the society as encouraged by the government,” he said.

Prior to establishing the partnership with Samurai Capital, the second largest insurer in Japan has already acquired 33 nursery homes in the country as part of a broader plan to grow its ESG investments. Earlier this year, the insurer has set their target net operating income for ESG real estate assets at 10 percent lower than normal real estate assets. It is also a member of the Net-Zero Asset Owner Alliance, an international initiative in which institutional investors aim to transition to portfolios with net-zero greenhouse gas emissions by 2050.

Yukihiko Ito, managing partner at Japanese capital advisory firm Asterisk Realty and Placement Agency, told PERE that there will be more large institutional investors following the approach of Dai-ichi Life going forward: “Many of them are trying to make an internal ESG impact model for their investment, and a segregated-type fund is one to fit each investor’s criteria.”